Are data centers being built fast enough?

New data centers are being built at a faster rate than any other real estate asset class globally, data from JLL’s Global Real Estate Outlook shows.

Completions are set to reach a new peak globally in 2025, exceeding the previous four years. Yet with capacity on track to grow at a 15% CAGR over the next two years, demand for critical data center infrastructure continues to outstrip supply.

“The current global data center expansion primarily focuses on previously underserved markets — the huge tier-one markets that never were,” says Dr. Glen Duncan, Data Center Research Lead, APAC, JLL.

Among the top cities with the highest completions expected this year are emerging hub markets such as Mumbai, Madrid, and Atlanta that have developed more recently than established data center hubs.

While the rise of artificial intelligence (AI) has accelerated development, exponential growth in data center infrastructure was already underway to support demand from legacy cloud-based applications and workloads, Duncan explains.

“The completions coming through this year were planned and approved prior to the AI boom, which means the market’s undersupply issue will likely persist regardless of recent AI advancements.”

Powering data center growth

A confluence of positive market conditions is fueling the pace of growth in these secondary markets, says Daniel Thorpe, Head of EMEA Data Center Research, JLL.

“The growth of digital economies is a clear driver, but supportive government policies and enhanced subsea cable connectivity are also crucial factors driving demand,” he says.

In many emerging markets, the launch of new subsea cables will significantly enhance connectivity with other regions, potentially attracting global data center operators.

A prime example is South Korea, where the data center market has traditionally been dominated by local conglomerates. “Interest from foreign operators grew alongside the increase in subsea cable connections, boosting connectivity into its digital economy,” says Duncan.

Other countries are poised to reap similar benefits. Spain boasts major subsea cables connecting it to Europe, Africa, Asia, and most recently the US with the Meta-owned Anjana subsea cable. In India, three major subsea cable projects are expected to become operational this year, positioning Mumbai as a major hub connecting countries across Africa, the Middle East, and Asia.

Government initiatives to strengthen digital infrastructure are also spurring growth.

The UK government, for instance, recently unveiled a new AI action plan that includes the creation of ‘AI growth zones’ to expedite planning proposals for data centers. Last October, Malaysia introduced guidelines to standardize and streamline the application and approval process for data center development.

But the scarcity of vital resources including power and land, could become a bottleneck to closing the demand-supply gap of data centers. This scarcity is forcing hyperscalers to adapt their strategies.

“Hyperscalers have long engaged in land banking, typically with a focus on long-term capacity needs,” says Thorpe. “However, this practice appears to be accelerating, with the focus shifting towards acquiring land for quicker development to meet the pressing need for speed to market.”

Bridging the gap

Until supply catches up to demand, hyperscalers are leasing more space from colocation providers as a temporary solution to accelerate their speed to market, according to Duncan.

“This shift reflects the widening gap between demand and the availability of build-to-suit options, constrained by factors like limited land and lengthy construction timelines,” he says.

While the past few years have witnessed delays in data center developments due to supply chain disruptions and project backlogs, Thorpe is sanguine about the prospects of the global data center landscape.

“We're starting to see a resurgence in new supply and planning decisions in recent months, with projects slated for completion and commencement this year,” says Thorpe. “Furthermore, the imminent arrival of new subsea cables in development will provide the critical connectivity needed to drive the development of new data centers globally.”